The dour outlook knocked shares of the world’s largest oilfield services company, previously called Schlumberger, down 3.6% to $42.38 and pulled rivals lower in morning trading.
Weak oil and gas prices have “resulted in a cautionary approach to activity and discretionary spend by many customers,” Chief Executive Officer Olivier Le Peuch said in a post-earnings conference call.
SLB, however, reiterated its expectations to deliver full-year adjusted margin on earnings before interest, tax, depreciation and amortization at or above 25%, partly helped by cost cutting.
In 2025, the company expects international market spending to rise at a low to mid-single digit percentage rate, while North American spending is forecast to be flat to slightly down.
Internationally, natural gas projects remains a bright spot, Le Peuch said, particularly in Asia, the Middle East and the North Sea, and are expected to grow regardless of decisions on oil production curbs by the OPEC+ producers’ alliance.
North American activity is not expected to rebound in the near term, and any increase in gas drilling rigs will likely be offset by declining order rates due to higher operating efficiency, he added.
SLB, which gets 81% of its business from overseas markets, said international revenue last quarter grew 12% on the year, helped by increased sales in Saudi Arabia, the UAE, Iraq and Kuwait, as well as in North Africa, offsetting reduced drilling activity in Mexico and Guyana.
The growth rate was the lowest in a year and much lower than the 18% year-on-year increase in the last three quarters.
North American revenue rose 3% sequentially due to higher activity in the U.S. Gulf of Mexico, partially offset by lower drilling in U.S. land.
Total revenue of $9.16 billion missed analysts’ estimates for $9.25 billion, according to data compiled by financial firm LSEG.
Net income attributable to SLB, excluding charges and credits, rose 13% to $1.27 billion in the three months ended Sept. 30. Excluding charges and credits, per share profit was 89 cents, compared with a consensus estimate of 88 cents.
Last quarter, the company said it had started a cost cutting program in some parts of the organization, including adjusting resources due to lower North American activity levels, and centralizing some digital delivery services.
It also announced the sale of its interests in the Palliser Block in Alberta, Canada, on Thursday. That sale will generate cash proceeds of about $430 million and reduce its well-abandonment liabilities, executives said.
“The focus on profit margins has made SLB earnings more resilient despite some of the industry headwinds including customer consolidation, geopolitical uncertainty, and a softer oil market,” Third Bridge analyst Peter McNally said.
Reporting by Seher Dareen in Bengaluru; Editing by Pooja Desai, Louise Heavens and Mark Potter – Reuters